Filed 2/11/98

CERTIFIED FOR PARTIAL PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, J. Richard Haden, Judge. Affirmed in part and reversed in part.

P. Robert Philp, Jr. and J. Jason Hill for Plaintiff and Appellant.

Johnson & McCarthy, Daniel B. McCarthy and John Evan Edwards for Defendant and Appellant.

Kopesky & Welke and Richard P. Tricker, Radcliff, Brestoff, Frandsen, Tricker & Dongell and Glenn M. White for Defendants and Respondents.

The San Diego Postal Credit Union (Credit Union) loaned Lourdes McManis money to purchase an automobile. At the same time, Credit Union sold Lourdes a disability credit insurance policy issued by Life Investors Insurance Company (Life Investors). After making her loan and insurance payments for three years, McManis became disabled and was unable to continue making the payments on her loan. McManis filed a disability claim with Life Investors and, while the claim was pending, Credit Union repossessed her vehicle. As a result of the repossession, McManis allegedly suffered emotional distress and property damage.

McManis sued Credit Union and Life Investors. Thereafter, Life Investors paid McManis's disability claim in full and Credit Union returned her vehicle. McManis later amended her complaint to add the company that repossessed the vehicle, San Diego Auto Recovery, Inc. (Auto Recovery), as a Doe defendant. Defendants moved for summary judgment. McManis opposed the summary judgment and moved to amend the complaint. After permitting McManis to file supplemental papers, the court granted summary judgment and denied the motion to amend.

McManis appeals. In the published portion of this opinion, we hold the summary judgment was improper because the parties' loan agreement permitted the credit union to repossess only if "permitted by law" and the credit union did not show it complied with applicable law governing credit disability insurance. (Civ. Code, § 1812.400 et seq.) In the unpublished portion of the opinion, we determine the court properly granted summary judgment as to Life Investors and Auto Recovery, and conclude the court did not abuse its discretion in denying McManis's motion to amend. Since Credit Union is no longer a prevailing party, we need not reach Credit Union's cross-appeal that the court erred in denying its request for attorney fees.

FACTUAL AND PROCEDURAL BACKGROUND

Viewing the summary judgment record in the light most favorable to McManis, the evidence before the trial court established the following.

In July 1990, McManis, a postal employee, applied for a $9,665 loan from Credit Union to buy a used vehicle. McManis agreed to make bi-monthly payments for four years until July 1994. In connection with the loan application, Credit Union asked McManis whether she wanted to buy credit insurance issued by Life Investors that would protect her if she became disabled and was unable to make her loan payments. McManis agreed to purchase the disability insurance policy and checked the appropriate box on the loan agreement form. After Credit Union approved the loan, McManis granted Credit Union a security interest in the vehicle. During the next three years, McManis's payments on the loan and on the disability insurance policy were automatically deducted from her payroll account.

At the end of 1992, McManis became pregnant. On June 24, 1993, a doctor diagnosed McManis with pre-term labor and said she should not return to work. On that date, McManis called Credit Union and said she was going to be disabled for at least two months and that she needed to file an application for disability benefits for the car loan. The Credit Union employee told McManis she would have to wait until she was "off work" for 30 days. The employee said "'[o]nce you have 30 days completed, call us back, and then we'll take care of it.'" McManis responded "'Can I call them so they can send me the form so I can get started on this?'" The employee answered "'No, you have to wait 30 days, and then we'll take care of it.'" When McManis expressed concern, the Credit Union employee said "'Don't worry about it. If you get behind in your payments and your name comes up in the computer, it will show that you have a claim, and you won't have a problem. There will be no problems.'"

Thirty days later, on July 24, McManis called the Credit Union to request disability benefits. In response, Credit Union faxed Life Investors a notice that McManis had reported a total disability. The notice stated that McManis's reported disability began on June 24, 1993.

About one week later, McManis received a claim form from Life Investors. The claim form contained three parts: the employee's statement, the employer's statement, and the doctor's statement. On August 3, McManis completed the employee's portion and sent the claim form to her employer.

On August 13, McManis made the last payment on her loan. On August 20, McManis delivered her baby. Approximately ten days later, on August 30, McManis's Credit Union loan went into default.

Within one or two weeks, Credit Union's collection officer, Joel Blouin, began making phone calls to McManis, notifying her the loan was delinquent. McManis told Blouin she had a claim pending with the disability insurer. Blouin responded "'We don't care. You have to pay us.'" In an effort to avoid the repossession, McManis retained a bankruptcy attorney and, on September 17, filed for Chapter 7 Bankruptcy.

For reasons not entirely clear in the record, McManis's disability claim form remained with McManis's employer (the United States Postal Service). Although McManis had sent the claim form to the postal service's personnel manager in early August, the manager did not act upon it for several months because she was apparently waiting to know when McManis was returning to work. On October 7, the manager finally completed the claim form and returned it to McManis. One or two weeks later, McManis forwarded the claim form to her doctor at Kaiser-Permanente Medical Care, Dr. Richard Block. On October 28, Dr. Block completed the doctor's statement portion and sent the form to the Life Investors claims office.

On November 4, the Life Investors claims office (located in Atlanta, Georgia) received the claim form. In the claim form, Dr. Block confirmed McManis was "continuously" and "totally" disabled from June 24, 1993 through "six weeks post partum." Dr. Block said he began treating McManis on July 16, 1993.

Eleven days later, on November 15, McManis called Life Investors and spoke with the person handling her claim, Joseph Clark. McManis asked Clark about the status of her claim. Clark said he was "working on it."

The next day, on November 16, Clark wrote a letter to McManis stating that before he could process the claim he needed written verification that McManis had been under a physician's care for three weeks before she saw Dr. Block (from June 24, 1993 through July 16, 1993). Clark, however, did not question the information showing McManis was totally disabled from July 16 through "six weeks post-partum." Clark enclosed a form to be completed by McManis's doctor. The letter concluded "After we have received this information, we will be pleased to give your claim our prompt attention." On that same date, Clark informed Credit Union that McManis had returned her claim form and Life Investors had requested the additional medical information.

On about November 20, McManis received Clark's letter. McManis telephoned Clark and told him it was important that her claim be paid because Credit Union was threatening to take her car.

On December 7, the Kaiser physician who had treated McManis before July 16 (Dr. Albert Ray) completed a claim form stating he began seeing McManis on November 15, 1992. Dr. Ray said McManis was disabled from June 24, 1993 through January 2, 1994. Dr. Ray sent the form to Life Investors.

Also on December 7, Credit Union obtained an order on its uncontested November 5 motion giving it relief from the bankruptcy stay, permitting it to enforce its lien upon McManis's vehicle.

Three days later, on December 10, Life Investors paid benefits for the period July 16 through August 20. For reasons not clear on the record, Credit Union did not receive this payment until after December 15.

On December 15, five days after Life Investors made the partial payment, Credit Union authorized Auto Recovery to repossess McManis's car. Later that day, two men from Auto Recovery arrived unannounced at McManis's home. While the men were in the process of taking the vehicle, McManis telephoned Blouin and told him the "insurance [had] already begun to pay." Blouin refused to lift the repossession order or call Life Investors to confirm the payment.

On that same date, McManis received another claim form from Life Investors pertaining to any further disability claims. McManis completed the claimant's portion of the form, stating that her doctor had extended her disability leave to January 3, 1994. That day (December 15), McManis sent the form to her doctor.

On December 16, Life Investors paid benefits for the period June 24 through July 16. Credit Union received that payment on December 21, 1993.

After her car was repossessed, McManis told Credit Union "how badly [she] needed [her] car" and that it was her only method of transportation. Credit Union personnel refused to discuss the matter with McManis.

On December 30, Life Investors paid benefits for the period August 20 to December 15. However, on January 3, 1994, Life Investors informed Credit Union that this payment had been made in error and requested Credit Union to return the money because the payment had been made before its investigation had been completed. Credit Union returned the payment.

On January 4, Life Investors wrote a letter to McManis stating it had received McManis's second claim form, and it was obtaining additional information from Dr. Ray regarding McManis's post-pregnancy disability. The letter stated that once that information was received, it would "review McManis's [second disability] claim for possible benefits." Ten days later, on January 14, McManis's doctor, Dr. Ray, faxed Life Investors information confirming that McManis had a continuing disability.

During the next week, McManis called Life Investors and spoke with Clark several times. Clark acknowledged receiving Dr. Ray's fax, but said that he needed further information and questioned whether the information he had received was authentic. Clark said he was requesting better copies of the medical records. After he received further information, Clark said the claim would be paid.

One or two days later, McManis spoke with Linda Bailey, a Life Investors manager. Bailey said the remaining claim benefits were going to be sent on January 24. McManis then called Credit Union and asked whether it would return her car. Credit Union refused.

On January 26, Credit Union sent McManis a letter stating she owed $2,793.90 plus accrued interest.

On February 7, McManis called Life Investors to ask why it had not paid the claim. Bailey responded that "Clark and the Credit Union are trying to credit the money where it belongs." Bailey said the Credit Union had said it was refusing to return the car because McManis had previously been delinquent in her payments. There was no evidence McManis had ever before been delinquent in her payments.

On that same date, McManis filed a complaint, in propria persona, against Credit Union and Life Investors, in an attempt to compel Credit Union to return her car. As against Credit Union, McManis alleged (1) declaratory relief (seeking return of her vehicle); (2) breach of contract; (3) breach of covenant of good faith and fair dealing; and (4) intentional infliction of emotional distress. As against Life Investors, McManis alleged breach of the covenant of good faith and fair dealing.

Three weeks later, on approximately February 28, 1994, Credit Union returned the car to McManis. McManis nonetheless continued her lawsuit against Credit Union and Life Investors to recover for damages caused by the repossession. The trial was scheduled for February 10, 1995.

One month before the trial, in January 1995, McManis retained an attorney. The parties stipulated to a three-month continuance to permit McManis's attorney to conduct discovery and prepare for trial. The new trial date was scheduled for June 16, 1995. After discovery commenced, McManis served Auto Recovery as a Doe defendant.

In April and May 1995, defendants filed summary judgment motions. McManis opposed the motions and moved to amend the complaint. The court ultimately granted summary judgment as to all parties and denied McManis's motion to amend.

DISCUSSION

I. Summary Judgment

A summary judgment motion "shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) A moving defendant must "prove an affirmative defense, disprove at least one essential element of the plaintiff's cause of action [citations] or show that an element of the cause of action cannot be established [citations]." (Sanchez v. Swinerton & Walberg Co. (1996) 47 Cal.App.4th 1461, 1465.) "The defendant 'must show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial.'" (Ibid.)

If the defendant makes such showing, the court must look at the plaintiff's papers to determine whether they "demonstrat[e] the existence of a triable, material factual issue. . . ." (AARTS Productions, Inc. (1986) 179 Cal.App.3d 1061, 1065.) "Counter-affidavits and declarations need not prove the opposition's case; they suffice if they disclose the existence of a triable issue." (Ibid.)

Applying these principles, we review the record de novo to determine whether each defendant met its burden to show it is entitled to judgment as a matter of law, and if so, whether McManis produced facts demonstrating the existence of a triable material factual issue.

A. McManis's Claims Against Credit Union

1. Breach of Contract

In her complaint, McManis alleged Credit Union breached its contract by wrongfully repossessing, and then refusing to return, her vehicle. Credit Union moved for summary judgment arguing the undisputed facts showed (1) on the date of repossession (December 15) McManis's loan was in default; and (2) the loan agreement between Credit Union and McManis (the Agreement) allowed Credit Union to repossess the vehicle on default.

On our review of the record, we conclude Credit Union failed to establish it was entitled to repossess McManis's vehicle under the Agreement and therefore Credit Union failed to meet its burden on summary judgment.

The Agreement provides a loan is in "Default" if the borrower fails "to make any payment or perform any obligation" or if the borrower is "involved in any bankruptcy . . . proceeding . . . ." The Agreement then sets forth the circumstances under which Credit Union may repossess the security:

Thus, under the Agreement's express terms, Credit Union was entitled to repossess the vehicle if (1) the loan was in default and (2) the repossession was "permitted by law."

Credit Union established the loan was in default on December 15 since it had not received the full amount due by that date. Credit Union, however, did not proffer any factual basis for finding the repossession was "permitted by law," specifically by the particular statutes governing a lender's right to repossess a security while a disability claim is pending -- Civil Code section 1812.400 et seq. (the "Act").

The Act prohibits a lender that has participated in supplying disability insurance to a borrower from pursuing certain collection actions and requires the lender to make specific disclosures. (§ 1812.402.) Certain provisions are of particular relevance here. First, if the debtor files a disability claim, the creditor may not invoke any creditor's remedy (defined to include "repossession" and "the commencement of any action or special proceeding") against the debtor for three months after the loan goes into default. (§ 1812.402, subd. (a).) Second, during three months after default, if the disability insurer rejects or partially accepts the claim, the lender must provide the borrower 35 additional days to pay the balance before repossession. (§ 1812.402, subd. (e).) Third, the lender must disclose "in writing in at least 10-point type" detailed information pertaining to the borrower's rights under the Act. (§ 1812.402, subd. (f).)

In enacting this statutory scheme, the Legislature intended to protect borrowers from a lender's collection efforts during a reasonable time the borrower's disability claim is being processed:

The Act provides "[t]he debtor may bring an action for damages, equitable relief, or other relief for any violation of this title." (§ 1812.402, subd. (i).) The Act's "rights and remedies" are "cumulative . . . to all other rights and remedies which the debtors may have under other laws." (§ 1812.402, subd. (h).)

Credit Union does not dispute that it was a creditor within the meaning of the Act and that the Act "might have provided a basis for a separate cause of action against [Credit Union] . . . ." Credit Union argues, however, that McManis never pled a separate cause of action under section 1812.400 or sought to amend the complaint based on the Act and therefore she cannot now assert the Act as an independent basis for reversing the summary judgment. (See Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663.)

Credit Union's focus is too narrow. The Act is not relevant here to permit McManis to add a new cause of action on appeal. Rather, the Act is relevant because it shows Credit Union failed to satisfy its burden to negate McManis's breach of contract theory. Credit Union produced evidence showing it repossessed McManis's vehicle on December 15, over three months after McManis's loan first went into default (August 30). But Credit Union did not present any evidence showing it satisfied several of the Act's other provisions.

First, it is undisputed Credit Union moved for relief from the bankruptcy stay on November 5, violating the statutory prohibition on "commenc[ing] . . . any action or special proceeding" within three months of the default. (§ 1812.401, subd. (d); § 1812.402, subd. (a).) Second, Credit Union proffered no evidence it made the required disclosures to McManis. (§ 1812.402, subd. (f).) Third, Credit Union produced no evidence showing it permitted McManis 35 days to satisfy the outstanding debt once Life Investors agreed to partially accept the claim. (§ 1802.402, subd. (e).) Since Credit Union made no showing it complied with directly applicable statutory mandates, Credit Union failed to show the repossession was authorized "by law" and thus that repossession was permissible under the Agreement.

Credit Union argues that because McManis failed to cite the Act in opposition to the summary judgment motion, this court is precluded from relying on the statutory scheme. This argument reflects a misunderstanding of Credit Union's burden on a summary judgment motion. "[F]or purposes of section 437c, a moving defendant is statutorily treated as a 'plaintiff,' and hence must present sufficient facts to make out a prima facie case of nonliability." (Chevron U.S.A., Inc. v. Superior Court (1992) 4 Cal.App.4th 544, 552.)

Credit Union sought to establish McManis could not recover on her breach of contract claim because it had a complete defense under the Agreement -- it was entitled to repossess the vehicle because McManis was in default. However, under the Agreement, Credit Union could establish a complete defense only by satisfying two contractual conditions: (1) the existence of a default on December 15, and (2) the repossession was authorized by law. Credit Union did not prove the second contractual prerequisite to repossession -- that repossession was permitted by applicable law (the Act). Thus, Credit Union was not entitled to summary judgment.

Credit Union alternatively argues McManis waived her right to rely on the Act by failing to raise the issue in her appellate briefs. However, the rule that a Court of Appeal will not consider points not raised in an appellate brief is "largely for the convenience of the reviewing court. [Citation.] A reviewing court is empowered to decide a case on any proper points or theories, whether urged by counsel or not . . . and will exercise that authority under fair procedure in an appropriate case . . . ." (Tan v. California Fed. Sav. & Loan Assn. (1983) 140 Cal.App.3d 800, 811; see also Banco Do Brasil, S.A. v. Latian, Inc. (1991) 234 Cal.App.3d 973, 999.)

Before oral argument, we gave the parties an opportunity to file supplemental briefs on the applicability of the Act. Each party filed a brief, including Credit Union, which submitted a seven-page letter brief. The parties were further given the opportunity to express their views on the applicability of the Act at oral argument. Because Credit Union had full opportunity to address the applicability of the Act and the Act reflects a clearly stated public policy, it is fair to apply the statute under the circumstances here. Moreover, since Credit Union is in the business of offering disability policies, it is not an unfair assumption that Credit Union was aware or reasonably should have been aware of the Act.

We conclude Credit Union failed to meet its burden on summary judgment to negate McManis's contract claim because it did not establish it complied with the Act before it repossessed McManis's vehicle.

2. Breach of Covenant of Good Faith and Fair Dealing

McManis additionally alleged a claim for breach of the covenant of good faith and fair dealing against Credit Union. In moving for summary judgment, Credit Union argued this cause of action did not state an actionable claim against it because the allegations referred only to Life Investors's handling of the disability claim. (See Bostrom v. County of San Bernardino, supra, 35 Cal.App.4th at p. 1663 [a summary judgment motion "'necessarily includes a test of the sufficiency of the complaint . . . .'"].)

We do not read the pleading so narrowly. McManis, who prepared the complaint without the assistance of an attorney, alleged the defendants breached their duties to treat McManis fairly and to "honor the contractual duties of the policies and agreements . . . ." (Italics added.) McManis further alleged "[d]efendants unreasonably and consciously applied the policy and agreement provisions in a manner which they knew, and now know is improper, but was calculated to save them money, and deprive plaintiff of the benefits rightfully due her." (Italics added.)

Because these allegations can be fairly read to include Credit Union's conduct in repossessing the vehicle while the disability claim was pending, the pleadings state a claim for breach of the implied covenant of good faith and fair dealing.

We also reject Credit Union's argument the court properly granted summary judgment because Credit Union established it had a contractual right to repossess the vehicle. As we have discussed, Credit Union failed to meet its burden to establish it had a contractual right to use the repossession remedy.

Thus, the trial court erred in granting the summary judgment on the breach of covenant of good faith and fair dealing claim against Credit Union. We note that such claim is solely a contractual cause of action for which tort remedies would be unavailable. (See Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 102 [adopting a rule "precluding tort recovery for noninsurance contract breach"].)

3. Intentional Infliction of Emotional Distress

McManis's final claim against Credit Union is an intentional infliction of emotional distress cause of action.

"The emotional distress tort is committed when defendant's conduct is intentionally intrusive and outrageous and has a severe and traumatic effect on the plaintiff's emotional tranquillity." (See Semore v. Pool (1990) 217 Cal.App.3d 1087, 1103.) A claim is not actionable unless the plaintiff establishes defendant's conduct "exceeds all bounds usually tolerated by a decent society." (Id. at p. 1104.)

In moving for summary judgment, Credit Union did not address the allegations that McManis suffered "severe" emotional distress. Credit Union instead maintained McManis could not prevail on her emotional distress claim because the undisputed facts showed Credit Union had the right to repossess the automobile and the repossession did not occur in an "'outrageous' manner."

"In the area of collection practices, California recognizes a creditor has a qualified privilege to protect its economic interest, though that privilege may be lost if the creditor uses outrageous and unreasonable means in seeking payment. [Citations.] [¶] In determining whether the conduct is sufficiently outrageous or unreasonable to become actionable, it is not enough that the creditor's behavior is rude or insolent. [Citation.] However, such conduct may rise to the level of outrageous conduct where the creditor knows the debtor is susceptible to emotional distress because of her physical or mental condition." (Symonds v. Mercury Savings & Loan Assn. (1990) 225 Cal.App.3d 1458, 1469.)

Viewing the summary judgment record in the light most favorable to McManis, the evidence established Credit Union sold McManis the disability insurance policy, knew McManis's disability claim was pending, knew that Life Investors had made a partial payment, knew that McManis was a single mother and had recently given birth, knew that McManis had no other reasonable means of transportation, and knew that it had not given McManis the required statutory notices or time to pay, and despite this knowledge went ahead and repossessed McManis's vehicle. Under the circumstances, a jury could reasonably find Credit Union's conduct was unreasonable and outrageous. (See Semore v. Pool, supra, 217 Cal.App.3d at p. 1104.)

B. McManis's Claim Against Life Investors

McManis's sole remaining claim against Life Investors is breach of the covenant of good faith and fair dealing. McManis alleged Life Investors acted in bad faith by failing to promptly pay her disability policy benefits. Life Investors moved for summary judgment, arguing the undisputed evidence established it did not act in bad faith in handling McManis's claim. The trial court agreed and granted the motion.

To establish the bad faith claim, McManis must prove the alleged delay in paying benefits was unreasonable. (See Carlton v. St. Paul Mercury Ins. Co. (1994) 30 Cal.App.4th 1450, 1456; Opsal v. United Services Auto. Assn. (1991) 2 Cal.App.4th 1197, 1205.) In determining reasonableness, the courts recognize a credit disability insurer has an obligation to act promptly because the insurer only needs to advance a small percentage of the claim each month and an erroneous decision could result in the insured's losing possession of valuable personal property. (McCormick v. Sentinel Life Ins Co. (1984) 153 Cal.App.3d 1030, 1048.) While the reasonableness of an insurer's claims handling conduct is ordinarily a question of fact, it becomes a question of law where only one inference can be drawn from the evidence. (Carlton v. St. Paul Mercury Ins. Co., supra, 30 Cal.App.4th at p. 1456.)

Here, Life Investors received McManis's first claim form on November 4, 1993, approximately two months after the loan went into default. McManis signed the claim form on August 3 and stated she was disabled from June 24 through the "present date." McManis's doctor confirmed McManis was disabled from June 24 through "six weeks post-partum." However, this confirmation was incomplete because there was no information McManis had been under a doctor's care before July 16. Further, because McManis's insurance policy did not cover disability caused by a "normal pregnancy or childbirth," the claim triggered a reasonable question as to whether the disability was covered under the terms of the policy. Notwithstanding these problems, five weeks later, on December 10, Life Investors made a partial payment on the claim, reflecting McManis's disability from July 16 through August 20. One week later, on December 16, Life Investors made the remaining payment, reflecting the disability from June 24 through July 16.

On this record, the only possible inference is that Life Investors acted reasonably. Within six weeks of receiving the claim, Life Investors had investigated and resolved the inadequacies of the claim form, and paid the entirety of the pre-pregnancy disability claim submitted to it.

With respect to McManis's second claim, Life Investors initiated the claim by sending a claim form to McManis's residence. McManis filled out the form and sent it to her doctor. In late December or early January 1994, an employee from McManis's doctor's office faxed the claim form to Life Investors. The doctor, however, had not personally signed or dated the form and some of the faxed information was apparently not legible. It was thus reasonable for the insurer to contact the doctor to verify the disability and to request supporting documentation. Life Investors approved the claim shortly after obtaining the necessary verification. Because Life Investors took less than four weeks to process, investigate, and approve the post-pregnancy disability claim, no reasonable juror could find Life Investors acted in bad faith.

Further, the record establishes Life Investors's conduct was not the legal cause of McManis's damages. On the repossession date, Life Investors had approved and paid the claim, but despite being aware of this information, Credit Union refused to lift the repossession order. Likewise, by late January or early February 1994, Credit Union had been told that Life Investors had approved the second claim, but again Credit Union refused to act on this information and return the vehicle. Thus, it was Credit Union's alleged conduct -- and not Life Investors's actions -- that was the actual cause of McManis's claimed damages.

McManis's reliance on McCormick v. Sentinel Life Ins. Co., supra, 153 Cal.App.3d 1030 is misplaced. In McCormick, the appellate court reversed a summary judgment, holding the credit disability insurer could be held liable for bad faith in denying insurance benefits even though the borrower delayed a substantial period before submitting his written disability claim. The underlying facts in McCormick are significantly different from here. First, in McCormick the credit union (which had a claims handling role) prevented the insurer from obtaining the borrower's claim form and such conduct was attributed to the insurer based on agency principles. There are no comparable facts in this case. Credit Union had no claims-handling role, it never prevented Life Investors from receiving claims information, and Credit Union did not act as Life Investors's agent for claims handling purposes. Additionally, unlike the insurer in McCormick, Life Investors paid disability benefits after a five- or six-week investigation and before the repossession took place. Further, to the extent McCormick stands for the proposition that a disability insurer's duty to pay a claim is triggered by oral notice of a possible claim before the written claim is actually received, we do not agree with this principle. (See California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 57 ["without actual presentation of a claim by the insured . . . there is no duty imposed on the insurer to investigate the claim"].)

Trying a different tack, McManis argues Life Investors's failure to train Credit Union employees is evidence of "bad faith." McManis relies on the evidence showing Credit Union told McManis to "wait" 30 days before filing her disability claim and that Credit Union had a policy of providing such information to borrowers. McManis, however, failed to present any evidence that Life Investors was aware of Credit Union's statement. Equally significant, there was no evidence showing Credit Union's representation caused any of McManis's alleged damages. Life Investors did not deny or delay the benefit payments because the claim had not been filed within 30 days of the disability. Further, the undisputed evidence established McManis waited three months after receiving the claim form to file the claim with Life Investors and that such delay was caused by McManis, her employer, and/or her doctor, and not by any of the defendants.

McManis alternatively argues triable factual issues exist as to whether Credit Union was Life Investors's agent and therefore whether Credit Union's conduct could be attributed to Life Investors for purposes of the bad faith claim. If McManis is referring to Credit Union's conduct in repossessing the vehicle while a disability claim is pending, there is no evidence Credit Union was acting as Life Investors's agent; the undisputed facts showed Life Investors had no control over and played no part in the repossession decision. If McManis is referring to Credit Union's conduct in representing to McManis that she should wait 30 days before filing a claim, there is no liability on such basis since (as discussed above) there is no evidence this conduct caused any of McManis's claimed damages.

As her final argument, McManis argues summary judgment was premature as against Life Investors because pending discovery would have "raised more genuine issues of fact."

Section 437c, subdivision (h) provides "[i]f it appears from the affidavits submitted in opposition to a motion for summary judgment . . . that facts essential to justify opposition may exist but cannot, for reasons stated, then be presented, the court shall deny the motion, or order a continuance to permit affidavits to be obtained or discovery to be had or may make any other order as may be just."

McManis did not present any affidavits explaining why facts pertaining to her claims against Life Investors could not have been presented. The summary judgment was not premature.

C. McManis's Claims Against Auto Recovery

On February 3, 1995, McManis amended her complaint to add Auto Recovery as a Doe defendant. On May 11, 1995, Auto Recovery joined in the summary judgment motions of Credit Union and Life Investors, and additionally submitted its own memorandum of points and authorities and separate statement of undisputed facts. Auto Recovery argued McManis "has not pled any factual or legal theory upon which liability can be found against [Auto Recovery]," and submitted evidence showing it was acting as Credit Union's agent in repossessing the vehicle. McManis did not proffer any argument or facts in opposing Auto Recovery's motion.

McManis now counters that paragraph 15 of the complaint adequately stated a claim against Auto Recovery. That paragraph states:

Paragraph 15 is included in McManis's first cause of action labeled "declaratory relief," which is alleged solely against Credit Union. Although McManis added Auto Recovery as a Doe defendant, such amendment did not include Auto Recovery as a defendant as to this declaratory relief cause of action. Even construing the complaint as liberally as possible, Paragraph 15 cannot be fairly read to constitute a conversion or property damage claim against Auto Recovery. We further reject McManis's argument Auto Recovery's summary judgment motion was procedurally defective. The court properly granted Auto Recovery's summary judgment motion.

II. Motion to Amend Complaint

In addition to opposing the summary judgment motions, McManis moved to amend her complaint. As against Life Investors, McManis sought to add claims for: (1) breach of contract; (2) intentional infliction of emotional distress; (3) negligent infliction of emotional distress; (4) negligence; and (5) civil conspiracy. As against Credit Union, McManis sought to add claims for: (1) negligence; (2) negligent infliction of emotional distress; (3) civil conspiracy; and (4) interference with civil action by spoilation of evidence. As against Auto Recovery, McManis sought to add claims for: (1) intentional infliction of emotional distress; (2) negligence; (3) negligent infliction of emotional distress; and (4) conversion.

The court denied the motion, explaining the "[a]mendment was not sought diligently and would prejudice the defendants as it comes approximately three . . . weeks before trial."

Trial courts may allow amendments to pleadings in the furtherance of justice. (Honig v. Financial Corp. of America (1992) 6 Cal.App.4th 960, 965.) "Although courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings . . . , this policy should be applied only '[w]here no prejudice is shown to the adverse party . . . .'" (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487.) Motions for leave to amend pleadings are directed to the sound discretion of the trial court.

McManis's proposed causes of action would have substantially changed the tenor and complexity of McManis's complaint from its original narrow focus to a wide-ranging lawsuit involving conspiracy and broadly-worded negligence claims. Defendants would have had to conduct substantial additional discovery at considerable expense. McManis admits she was aware of the facts underlying each of these claims shortly after she filed her original complaint. McManis nonetheless delayed until the eve of trial to seek to amend her complaint. On this record, there was no abuse of discretion.

III. Costs

McManis contends the court erred in awarding costs to Life Investors ($4,837.49) and Auto Recovery ($654.75). McManis asks us to strike these cost awards because the court found her to be in forma pauperis. (Cal. Rules of Court, rule 985.)

California Code of Civil Procedure section 1032, subdivision (b) provides "[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding." (Italics added.) A defendant in whose favor the judgment is entered is a prevailing party. (Code Civ. Proc., § 1032, subd. (a)(4).) Thus, Life Investors and Auto Recovery are prevailing parties entitled to recover their costs as a matter of law.

There is no statutory authority creating an exception to this mandatory cost rule if a party has been declared in forma pauperis. (Cal. Rules of Court, rule 985.) Absent such statutory exception, the trial court had no discretion to refuse to apply the statutory mandate. The cost awards to Life Investors and Auto Recovery were proper.

DISPOSITION

Judgment reversed as to Credit Union. Judgment affirmed as

to Life Investors and Auto Recovery. Each party to bear its own costs.

CERTIFIED FOR PARTIAL PUBLICATION

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HALLER, J.

WE CONCUR:

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WORK, Acting P.J.

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HUFFMAN, J.